Harvey Rosenfield on the Corruption of the Civil Justice System

In 1971, Lewis Powell, a corporate lawyer and future Supreme Court justice, wrote a memo addressed to the director of the U.S. Chamber of Commerce. 

Harvey Rosenfield

The Powell Memorandum highlighted Ralph Nader as the personification of the threat to corporate America and outlined why the Chamber’s membership needed to aggressively make government, politics, and law more friendly to big corporations. 

The Powell Memorandum’s playbook was adopted by corporate America in the 1970s, expanded in coordination with the Reagan Administration’s deregulation philosophy in the 1980s. 

It led to a network of law firms, lobbying associations, public relations companies, nonprofits, and academic institutions working together to undermine the average American’s access to justice. 

Now more than fifty years later comes the anti-Powell memo. 

It’s a 259-page study that documents how America’s civil justice system has been corrupted by corporations and no longer protects average Americans from the countless non-stop thefts of their money, time, and privacy.

The report – Reboot Required: The Civil Justice System Has Crashed – details the most common costly and abusive tactics that consumers face in the U.S. market place – against which they have virtually no legal rights or remedies.   

It chronicles how corporations seized control of the legislative, executive, and judicial branches beginning in the 1970s to erode landmark consumer protection laws and block the passage of badly needed new ones, crippling the class action system and stripping Americans of their cherished right to their day in court and trial by jury.   

And it presents a detailed blueprint for the restoration of the civil justice system, in the form of a model state consumer protection law, The Represent Act.  

“The relentless corporate assault on the rule of law has deeply damaged Americans’ confidence in the legal system, a development with dire implications for U.S. democracy,” warn Harvey Rosenfield and Laura Antonini, the authors of the report. “We have lately learned how fragile our institutions are, how quickly anger and despair can turn to violence when the rules do not apply to everyone. We must reclaim control of our civil justice system from the corporations so that it serves the American people and empowers them to meet the challenges of the 21st Century.” 

Rosenfield’s claim to fame is as author of Proposition 103, a 1988 initiative on the California ballot that was a direct response to skyrocketing insurance premiums. 

The initiative mandated a 20 percent rollback in auto, home, business, and medical malpractice premiums, instituted stringent regulation of insurance rates, barred a variety of abusive and discriminatory insurance practices, and gave any person the power to go to court  to challenge violations of the law.

Prop 103 passed with 51.1 percent of the vote – despite being outspent 15 to 1 by the industry – was a startling consumer victory that forced insurance companies to refund over $1.43 billion in overcharges and, by 2018, had saved California motorists an estimated $154 billion. 

“We understood that the problem with insurance rates going up was not jury verdicts or frivolous lawsuits, as the insurance companies claimed,” Rosenfield told Corporate Crime Reporter in an interview last month. “It was instead the fact that the insurance industry was unregulated. They were trying to offset investment losses with higher premiums. And they took advantage of current events to blame the legal system.” 

“We then drafted a proposition to regulate insurance rates. And in 1984, the California voters voted to pass it. It was a landmark law and a huge upset. The insurance industry spent $63 million to defeat it. We spent a few million. And we successfully turned the debate from the disinformation about the legal system into a targeted attack on the cause of higher insurance rates.”

“I have spent the last 34 years defending Proposition 103 and using its powerful tools of private enforcement to make sure the insurance industry kept its rates low and obeyed the law. We have saved over $3 billion in premiums for doctors, motorists, homeowners, renters – making sure the companies don’t overcharge people.”

“We began a project to examine the civil justice system. We looked at how it works, where it’s at and what should be done. Over the last five years, many people lost faith in the legal system and in democracy.”

In 2017, you decided you needed a broad overview of civil justice system. You started researching and writing this report. How did you get started?

“We started off wanting to understand what was happening to consumers in the marketplace. We all know from personal experience that we are inundated with abuses on a daily basis. Errors on our credit cards. Problems with a bank statement or with your cable bill. You get an airplane ticket, you have to reschedule and suddenly the money you are supposed to get back disappears. Rebates you are supposed to get when you buy your cell phone never come through. Your privacy is completely weaponized against you and used by artificial intelligence to give you a score to determine whether you get a job, get housing, or go to college.”

“We wanted to survey the daily indignities of modern life of most Americans and see what rights and remedies that were available to them. We had a pretty good idea of the answer. But it was quite profound. Our conclusion was that the civil justice system no longer protects average Americans.” 

“And when you try to get on the phone to get somebody to resolve your dispute, you might be shuttled to an offshore call center where the people don’t speak English very well. Your options are – try to resolve it yourself or bring a class action lawsuit. No lawyer is going to take any individual’s case to challenge a large corporation in court.”

“One of the features of our American system has always been your right to your day in court and trial by jury. And we discovered that all of those rights and remedies have been undermined and delegitimized by corporate propaganda over the last fifty years.”

“What triggered the backlash from the corporations was Ralph Nader and the rise of consumerism and the changes of corporate and government accountability that Ralph accomplished in the late 1960s and early 1970s. That provoked the counterattack that never stopped. And the attack has whittled away consumer protection laws at the state and federal level, blocked the passage of badly needed new reforms as our marketplace has evolved. One obvious example has been the privacy issues that have arisen since the advent of the internet and cell phones.” 

“We found that corporate America had conducted a fifty year campaign with the aid of a phalanx of corporate lobbyists, law firms, think tanks, public relations firms and friendly politicians. And they unabashedly began to promote judges that corporate America viewed to be friendly to the cause of big business at the expense of the average American.”

“We wanted this report to be critically readable and understandable by average Americans. The first 75 pages lay out the daily indignities we all face in the marketplace. By the time you get to the end of that section, you ask – what can people do about the terrible abuses that are inflicted upon them in the marketplace by big corporations?”

“Then we surveyed the legal system – and in particular the class action system. The class action is the tool intended to enable groups of small consumers to gather together to bring a lawsuit that no one consumer could afford, but that would obtain justice for all people who had been injured in the same way by the same practice by the same company or group of companies.”

“We looked carefully at the legal system. And our conclusion was that the civil justice system has failed to protect average Americans from these abuses. The corporate assault on the legal system succeeded in turning the legal system from a shield against corporate abuse into a weapon to punish consumers without remedy.”

You have also drafted state legislation that would remedy many of these wrongs. It’s called The Represent Act. 

What does it do?

“The Represent Act tracks the report. It prohibits a vast array of illegal activity undertaken by corporations in the marketplace today. Currently, class actions almost never go to trial. We felt that after writing the report and reaching a conclusion that the civil justice system had failed, we had an obligation to let people know that there was a way to fix it.” 

“The reforms would give consumers new rights and new legal remedies, far tougher punishment of corporate defendants and wrongdoers. Many provisions are intended to eliminate unnecessary or unreasonable corporate defenses that had been erected mostly by judges, not by legislators. Everybody is familiar with mandatory arbitration clauses and the fine print that bar people from getting to court to challenge a corporate misdeed. And we call for the restoration of full access to the legal system.”

If you were to propose a ballot initiative for California that would remedy the situation, how would it read?

“We would expand the definition of unlawful to cover all of the wrongful conduct that exists in the marketplace. That would be one paragraph,” Rosenfield said. “Then we would increase people’s ability to go to court to challenge corporate misconduct. That would be a paragraph. We would propose far greater penalties and damages for corporate wrongdoing, including punitive damages. That’s paragraph three.”

“So, let’s say a company violates one of our prohibitions on overbilling. And it takes an hour and a half to rectify the wrong without litigation, you would be entitled to get paid for your hour and a half. Even if it were a $2 dollar billing mistake, the minimum penalty against the corporation would be $1,000.”

“There would be compensation for your time and frustration trying to rectify the problem. The point would be that corporations would never dare to engage in the kind of abuses that they engage in today if they had to pay the kinds of damages that we are proposing.”

“We would also eliminate onerous defenses. That’s paragraph four. These are defenses that corporations use to defeat legitimate litigation.” 

Do you have plans for a ballot initiative?

“Right now, no.” 

Will your report get a hearing on Capitol Hill?

“We have reached out to several members of Congress and asked them to consider convening a series of hearings on the state of consumer protection in America. What we have proposed is a structure for those hearings based on our report. There would be a hearing on how consumers are victimized daily. Then there would be another hearing on the extent to which the legal system no longer protects consumers against those abuses. How does the legal system help consumers today? It doesn’t and it can’t, the way it’s been corrupted.”

“And the last series would be proposals for reform.”

“Many state class action rules are based on federal class action rules. Even though our proposals are state based reforms, if Congress adopted a far more balanced approach to class action litigation, it would ricochet around the country.”

Who has shown interest in Congress?

“It’s too early to name names.”

[For the complete q/a format Interview with Harvey Rosenfield, see 36 Corporate Crime Reporter 12 (12), March 21, 2022, print edition only.]

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